If you are familiar with crypto, it’s likely you know the name Vitalik Buterin. In 2015 Buterin and a team of co-founders launched a little tiny project called Ethereum. Now known as the second-largest cryptocurrency with incredible potential.
Ethereum had a few other important founding members, one of these members was Charles Hoskinson.
Just a couple of short years later Hoskinson found himself at the center of a brand new project launching Cardano, named after the Italian mathematician Girolamo Cardano.
Welcome to shavuna the number one website channel for crypto education and here we explain topics of the cryptocurrency world using analogies, stories, and examples so that you can easily understand them.
In this blog post, I’m going to explain what Cardano is. Specifically how it works and how Ethereum fits into play.
Let’s get started.
What is Cardano?
What is Cardano?
Well, to make things simple, let’s give a very basic answer. Cardano is simply just a proof of state cryptocurrency.
Now, to really explain what it means and to summarize why it’s not just some random altcoin.
Let’s hear what the founder has to say about it.
Basically, Hoskinson saw that cryptocurrencies would suffer from three main problems. These problems are scalability, interoperability, and sustainability.
Let’s go through each of these issues to understand the intentions behind the project.
The second problem is interoperability. This is a very old technological problem. Let’s think about this using an example of early wireless networking.
If you’ve ever wanted to set up a wireless network in your house you know you have to connect your devices with a router so that the signal can reach your device. But what if your Samsung only connected to Samsung routers?
It wouldn’t be very useful if everybody had to get all the same hardware for everything from the ground up and from the same brand and in fact that would probably be considered a monopoly by the united states government.
How does Cardano make sure that crypto doesn’t suffer from the same problem? Well, it allows for people to easily bridge Cardano and other cryptocurrencies that use other blockchains by using something called the KMKZ sidechains protocol.
This is basically the crypto version of being able to easily exchange US dollars for Canadian dollars or euros or some other currency. Now unlike other cryptocurrencies, Cardano knows it won’t be the only cryptocurrency, and because of this, it proactively works on an interoperability solution using bridges.
If you want to learn about the technicals of how a blockchain bridge works, you can definitely check our specific blog post on it.
Fans of bitcoin know this problem all too well. Because of bitcoin’s block size, the network can only confirm around five to seven transactions per second.
This is not comparable to the visa behemoth that can do tens of thousands of transactions per second.
The block size debate in bitcoin raged on for years, but at least one question remains for basically any cryptocurrency.
How can this project scale?
As Hoskinson has said, we want things to speed up as more users use a system, not slow down as many of them do.
If the network is being used, it needs to speed up to be consistent for its users. What he meant was that a blockchain’s capability should scale linearly with its usage.
Cardano solves this by using epochs, which basically divide up who validates certain blocks in the blockchain to be even more precise.
They use slots and any of the nodes. Nodes are just computers from people or organizations that are running the blockchain. They can be nominated to be a slot leader.
These terms don’t really need to mean much to you, but they are what allows Cardano’s proof of stake to scale.
Cardano calls this system Ouroboros. But Ouroboros could warrant its article due to its complexity. The important thing here is that slots can be divided up further, which lets the network scale.
The third problem is sustainability. Now, if Cardano or any other cryptocurrency will host much of our financial lives, we would need a way to guarantee that the system stays functioning.
So when we say sustainable, we don’t necessarily mean environmentally sustainable. However, many say that Cardano is environmentally sustainable because of its proof of stake instead of proof-of-work mechanism.
There is a massive debate about environmentalism in the crypto world. Regardless, what we are talking about is the network’s ability to keep the lights on, continue to make improvements, and have a healthy development community.
Cardano solves this by establishing a treasury that collects fees and pays them to those who make contributions to the network.
In short, Cardano is a self-sustainable cryptocurrency that intends to improve itself in the future, and it is developed with that in mind.
Now, you’ll notice that Cardano seems to be designed with one thing in mind; solving problems very rationally and logically.
This is a project created and run by a man who used to be a mathematician. Now, this shows up in several ways.
Namely the fact that it was named after an Italian mathematician.
The token which actually carries value and is used on the network is called ADA. So, Cardano is the blockchain, and ADA is the coin.
Now, this is not Americans with disability acts, but it comes from the name of a woman who is now considered to be the first-ever computer programmer, Ada Lovelace.
Beyond naming, conventions Charles Hoskinson clearly has shown ambition for tackling significant challenges through methodical, reasoned, and problem-solving within the Cardano project.
There is tons of research being done, papers being written, and even peer reviews to get third-party feedback.
Some may say Charles even has a cold-like following, but he does often do a live stream, update logs to update his audience.
Despite Cardano’s unique style and branding, you might just ask yourself how exactly it is different from Ethereum?
Well, lucky for you, we’re going to cover it.
How is Cardano Different From Ethereum?
Now, we’re not going to speculate about individual conflicts or personalities. Still, the story goes that Hoskinson thought Ethereum should be a for-profit entity, whereas Buterin wanted Ethereum to stay as a non-profit.
Both of their wishes ended up coming true in a way.
Buterin stayed with Ethereum, and Hoskinson took a sabbatical shortly after a proposition fellow co-founder of Ethereum.
Jeremy Wood approached Hoskinson about creating a for-profit entity that would create blockchain projects for companies, governments, and even other organizations.
This company became known as IOHK or Input Output Hong Kong, and it’s an homage to the engineering term and to the place that it was incorporated.
So what does this have to do with Cardano, you ask?
IOHK’s main project is what we now know as Cardano. Although Ethereum and Cardano are both smart contract platforms, they do differ in several ways.
1. The first is that Cardano has been a proof-of-stake blockchain from the beginning. This means that instead of bitcoin’s method of doing challenging math problems to mine coins. They validate transactions according to how many tokens the validators stake.
So for, example if you own a lot of Ada, you can stake that ADA and have more power in the network than those with little ADA. Ethereum started as a proof of work chain but is now migrating to become a proof of stake chain.
2. Another important thing is that, like bitcoin Cardano is deflationary. This basically means there is a fixed amount, and in the case of ADA 45 billion total ADA, coins will be minted as opposed to Ethereum, which mints more and more Ethereum every year.
From an economic perspective, that would generally mean that all other things being equal, ADA should increase in value or appreciate more than Ethereum. However, that is as close to price speculation as we will get to today.
Where is Cardano Going?
With the future in mind, though, let’s look at where Cardano is being used in the real world and where it might be used in the future?
Despite the ICO craze of 2017, which was known for many shady scams, Cardano actually started with an ICO. Where it differs, though, is from that point on.
Cardano showed it should be taken seriously through its commitment to rigorously researching and testing its solutions.
IOHK helped both the University of Edinburgh and the University of Wyoming support their blockchain and initiatives.
And from there has launched into several real-world partnerships. We can see the breadth and depth of Cardano’s potential when we look at its collaboration with the government of Georgia.
The country, not the state, and they have decided to build an id verification system using both Cardano and IOHK’s enterprise solution Atala.
This is already getting more complicated and a little bit outside of the scope of this blog post. Still, they followed this in 2021 with an agreement with the government of Ethiopia to use Cardano for student ID verification.
Commercially though, and likely its most impressive partnership is with New Balance.
I know what you’re thinking; that’s right, IOHK has been hired by New Balance to use its technology to verify the authenticity of its sneakers.
Very similar to how Vechain is used to authenticate supply chains using a blockchain.
As a methodical and precise organization, IOHK has released a road map for Cardano’s future which includes five eras:
- Smart contracts
- Scaling and then
Which you can actually read the roadmap if you’d like. Each of these eras takes on a new challenge and adds new products and features to Cardano’s capabilities.
It’s safe to say that regardless of any future utility, Cardano will always have a plan for what they do next.
That’s all we have for Cardano today. If you have any questions feel free to leave them in the comments below, as Cardano is a big project with many hearty fans.
Thank you guys so much for reading. I really hope that you’ve learned something in the post, and most importantly, I hope to see you in our next blog post.
Feel free to subscribe to our newsletter below.